With corn prices hitting the $8 level, hog market weights are coming under greater scrutiny. As feed efficiency drops in the late-finishing phase now is the time to weigh the options involved with this costly gain.
“Currently, the optimal market weight has dropped much more significantly than some producers realize,” says Mike Tokach, Kansas State University Extension swine specialist. “With current market hog prices and higher feed costs, the optimal market weight is now 245 to 260 pounds for many producers,” Tokach says. That compares to 280 pounds or higher that had become the norm.
While some packer-imposed discounts may apply to pigs in this lighter weight range, it may still be advantageous for you to bear the penalty. “The discounts are not great enough to offset the savings in feed costs made possible by reducing market weights that low,” Tokach says. “This means that hogs should be out the door 10 days to 14 days earlier than normal, depending on the packer grid where producers are marketing pigs.”
Some packers have taken a proactive approach. Tyson has notified producers that it would temporarily revised its grid and will not discount hogs in the 230-pound to 240-pound liveweight range.
While reducing market weights is an economic consideration for pork producers today, there are several factors that enter the equation to determine your optimal market weights.
How Much Can You Save?
Iowa State University Extension swine specialists Dave Stender, Mark Storlie and Matt Swantek addressed some of the issues involved in reducing hog weights with Pork magazine, including the savings in feed costs.
A quick look at the cost of the final 10 pounds of gain in the late-finisher tells the story. Assuming feed cost at $350 per ton, Stender estimates each 10 pounds of weight gain in the late-finisher costs $6.50 in feed. He also calculates the carcass gain from the additional 10 pounds of liveweight at about 7.45 pounds. “At hog price of $65 per hundredweight carcass, the value of that final 10 pounds is $4.84, creating a $1.66 loss in feed costs for those 10 pounds.”
However, each producer’s situation is different due to varying marketing agreements and risk-management activities, so market-weight decisions must be based on his/her own circumstances. “For example a producer who placed pigs in April and locked in the market hog price and feed cost can stay the course to market at the planned weight,” according to Storlie.
Still with the cooler weather prompting faster gains, attention is needed to keep market weights in line. “Given that marginal feed cost is greater than marginal gain revenue, producers should attempt to market near the lowest weight of their packer’s grid which avoids discounts,” Storlie says. He suggests that, if possible, operations could move shipping schedules up by a week or two to reduce weights.
Since hogs marketed in October were placed early in the second quarter, it may be a bit early to see an industry trend in reduced market weights. While many producers have some ingredients locked in, those who were expecting a bumper corn crop this year may still be exposed and may consider selling lighter. How much lighter will depend on where their breakevens are projected, Swantek says. Then there’s the worrisome prospect of feed-grain supplies simply drying up.
Pigs being placed in October will obviously have higher breakeven costs, which may encourage lower target market weights. “Our most recent analysis revealed no incentives to market hogs in excess of 265 pounds,” says Ernie Hansen, swine group manager, Hubbard Feeds. In fact, he found the return over costs improved by 54 cents per head when selling pigs at an average of 245 pounds. “Total expenditures are reduced by more than $19 per head, as well as consuming about 70 pounds less feed,” he adds.
Re-set Your Target Market Weight
Determining optimum market weights requires a clear understanding of your production cost, which is then evaluated against the market price and your packer grid at various weights. “The variation of weight on a market load and within a barn also will help in predicting premiums and discounts,” Hansen says.
As feed prices moved higher, some producers used a step-by-step approach to reduce market weights. “We were marketing at 284 pounds this summer, then moved down to 274 pounds, then to 262 pounds. We’re now contemplating 245 pounds,” says Al Wulfekuhle, Quasqueton, Iowa, a partner in two farrow-to-finish operations marketing around 100,000 hogs annually.
The only clear way to determine optimal market weights is to run breakevens at different weights, Swantek says. To help in his decision process, Wulfekuhle relies on data from JBS United, his own production data, as well as an online market-weight calculator developed by Kansas State University.
Some producers may not have a choice but to sell lighter-weight market hogs because of low-energy diets. Those pigs will not grow as fast, and if the barn has to be turned, hogs will have to be sold lighter.
Producers using ractopamine who choose lighter market weights may need to revise their feeding program and budgets to ensure they receive full advantage of the expected benefits, Swantek adds.
Aim for Uniformity
Whatever market weight you settle on, weight uniformity remains a priority. Loading crews must have a clear understanding of the target selling weights for each group. “The hour that a marketer spends identifying a load of pigs affects costs more than any other hour during production,” Hansen says.
Knowing your packer’s grid and identifying where discounts are initiated is vital, Storlie says. Big pigs that are discounted for exceeding the packer’s grid are doubly unacceptable because of increased feed cost and lower revenue. But a load with a wide weight variation and high sort loss can be just as costly. “Packers are discounting lighter hogs just as much or more than heavier hogs,” Swantek says.
Storlie suggests that loading crews use a portable scale to help “calibrate their eye” when targeting lower market weights. This will require some training. Consider having the loading crew sort a small trailer load or two of representative pigs and have them weighed to test the crew’s ability to judge weights.
Focusing on lighter market weights is a dramatic shift in the production mentality and it will take some recalibration. Your production records, input pricing and availability, packer reports and online tools can help you determine your new optimum market weight.
Calculating Lower Market Weights
To help evaluate optimal market hog weights, Kansas State University has developed online calculators that you can download to your computer. Among the tools, available at KSUswine.org, is a feed efficiency calculator that figures what happens to margin-over-feed costs as hogs reach finish weights.
Also available is a market-weight predictor, which incorporates the marketing grids of most packers. Producers select the appropriate packer, enter their feed costs and the hog market price; it then presents the current optimal market weight for hogs.
A downturn in market weights will reduce the pork supply and eventually lead to firmer hog prices, according to Mike Tokach, Kansas State University Extension swine specialist. “Our hope is that as market weights are reduced, it will stabilize and increase market prices into November and December.”